Whether control samples drawn for testing are chargeable to central excise duty under the provisions of Central Excise Act??

PJ/Case Laws/2010-11/1115

Prepared By:
CA. Rajani Thanvi(ACA),
Bharat Rathore(BCom),
Parag Ghate(BCom),

Case: CCE, Belapur Vs RPG Life Sciencers Ltd.

Citation: 2010-TIOL-830-HC-MUM-CX

Issue:

Whether control samples drawn for testing are chargeable to central excise duty under the provisions of Central Excise Act??

Brief Facts:

The respondent-assessee is engaged in the manufacture of bulk drugs. A show cause notice was issued to the assessee calling upon them to show cause as to why duty should not be recovered in respect of the controlled samples cleared within the factory for testing and why penalty should not be imposed upon the assessee.

Appellants Contention:

The assessee contended that the samples were not removed outside the factory but were drawn by the in house laboratory within the factory premises and were actually consumed during the process of testing itself and, therefore, no excise duty was leviable on the controlled samples drawn for testing. The assessing officer rejected the claim of the assessee and passed an order confirming duty and levied penalty. Appeal filed by the assessee was dismissed by Commissioner (Appeals).

Respondents Contention:

Respondent submitted that the larger Bench decision in the case of Dabur India Ltd. (supra) has been distinguished in a subsequent decision of the Tribunal in the case of Positive Packaging Industries Ltd. V/s. Commr. of C. Ex., New Panvel.

Reasoning:

In the present case, the specific case of the assessee is that samples drawn for testing were not cleared out of the factory but were cleared within the factory for testing and that the said samples were consumed in the process of testing. These facts have not been controverted by the revenue. It is not the case of the revenue that the assessee has failed to maintain the books / accounts as required under the Rules relating to the samples drawn for testing. Where the goods are not cleared out of the factory premises but were drawn for testing within the factory and in fact were consumed within the factory during the process of testing, the question of demanding any duty on those samples does not arise. And drawn support for this view from the decision of the Apex Court in the case of ITC Ltd. V/s. Collector of Central Excise, Patna.

Judgment:
Appeal is dismissed

Comment:

This is a landmark decision by the High Court that duty is not payable on the samples when these were cleared and consumed within the factory for testing purpose. As these are not cleared out of the factory so question of leviablity of excise duty does not arise.

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PJ/Case Laws/2010-11/1115

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